Why Americans Don’t Save!
If your bank was paying you $10 for every $100 that you saved in your savings account, do you think you would save more?
Right now, people are getting around 0.01% give or take a few points. That is about 1 PENNY per 100 dollars saved. With inflation those people are losing money each year by saving in their bank…
Why would anyone save in this atmosphere? Even financial experts are lowering the amount of cash they recommend that people save.
This clearly leads to people saving less money because it just isn’t economical to save money. You should either spend it now before inflation melts away your hard-earned dollars or you should invest it. Saving cash in 2021 is allowing your capital to be slowly chipped away and stolen.
When you don’t have cash, you are at risk of an emergency happening and not being able to pay for it without selling your investments. Every day there are people who must sell all their assets to pay for a catastrophic event or go into immense amounts of debt. This is because they didn’t want to hold onto cash that is being devalued each day it’s in their bank account.
Much of this isn’t necessarily a conscious decision, but the entire ecosystem and economy is playing to these inflationary systems and it trickles down into everyone’s subconscious, daily habits.
Buying a car with a year’s salary, has not been a normal thing to do historically.
Buying a house worth 5-10 years annual salary, has not been a normal thing to do.
Having credit card debt to buy consumer goods, has not been a normal thing to do.
Billionaires and millionaires use debt to make more money, everyone else gets destroyed by debt.
This now leads me to stablecoins.
What are stablecoins?
Stablecoins are very simple.
Stablecoins are crypto currencies that peg themselves to an external value. For example, Gemini Dollar is a stablecoin that pegs itself to the USD. That makes 1 Gemini Dollar = $1 USD, always.
The reason they were initially made is because it makes lending and trading cryptocurrencies a bit easier. If you want to go from one crypto to another crypto, having a way to put money into a stable crypto, aka stablecoin, is very useful.
Depending on the stablecoin, it can also allow traders to “get around” some government regulations.
One example might be that people in Venezuela typically have a hard time attaining dollars. So, they can instead purchase a stablecoin that is tied to the US Dollar and save, trade, and invest their money that way.
Why would I want to use a stablecoin as somebody in the United States who has access to dollars?
The primary reason that I invest most of my ‘liquid’ assets into stablecoins is because they provide around an 8% interest rate or higher.
Places like Gemini, BlockiFi, Voyager, FTX, and countless others will pay you a flat APY at around 8% for holding a stablecoin on their platform.
They use that money to provide loans to other customers, loans that are typically backed with collateral. These loans are extremely low risk which is why I’m willing to risk most of my cash in these stablecoins.
I highly recommend understanding how each exchange operates prior to investing in the highest paying stablecoin.
I am effectively getting an 8% savings account, instead of a .01% savings account like most banks in the United States. To me that extra 8000% return is worth the small risk. Even if it’s just to keep up with inflation.
I only recommend doing this with exchanges that you trust. You should do a lot of research and see how they are holding and investing your money to ensure there is nothing fishy going on.
What are the risks?
One of the primary risks is using a stablecoin backed by an exchange, and that exchange going bankrupt/out of business. Check to see if the exchange has prepared for this, or if they have insurance to cover this.
Another risk would be the stablecoin issuing more coins that they have collateral for. For example, if Gemini gave out 2 stablecoins per dollar they receive. Meaning they only have half of the necessary dollars that they’re loaning out. This is illegal, so using a regulated exchange is your best bet. Don’t blindly trust something just because it’s a “large crypto exchange.”
Many exchanges publish their holdings so you can check this. This is also why you’d want to go with a heavily regulated exchange to ensure they are held accountable for their lending practices.
What are the benefits?
The main benefit is you get a high interest place to save some ‘dollars’. I don’t hold much of my wealth in dollar assets. But the small percentage that I do keep is mainly in stablecoins.
I personally consider this my ‘savings account’ even though I have a real savings account at a bank. This is a medium-term storage facility for my inflationary fiat dollars. In November of 2021 the CPI (government inflation) rate was about 7%. My stablecoin investment was paying me about 8%. So instead of losing 7% on my dollars, I made 1%, which is good enough for me for medium-term dollar holdings. If inflation becomes worse, I will re-assess my options.
If you live outside of the U.S. and want access to dollar backed assets, stablecoins can also be used for this purpose. Many citizens in countries with collapsing monetary systems have benefited from this option.
If you are a very ‘ANTI-RISK’ person. This could be considered an extreme low risk investment if you do the proper research before buying a certain stablecoin. Some of them are sketchy, some are not.
8% return is considered quite good in the investment world, especially considering the low-risk environment of some stablecoins.
Stablecoins are brand new. They may be the future, or banks may figure out how to compete. We really don’t know. I use them to keep up with inflation and to not lose money on my liquid assets.
Use them at your own risk, I would not recommend using them as a primary or only investment, however if you do your own research and decide that is the best method for you, go ahead and do so!
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🔎Disclaimer🔎 All content in this blog is for entertainment purposes only. I am not a professional financial advisor and my statements are not to be taken as instructions or directions. In no event will I be liable for any losses or damages arising from the use of content from any of my platforms, including, but not limited to YouTube, Blog, or any other social media. I reserve the right to change my opinions and entertainment content at any time. Please be sure to do your own due diligence!